In Demetriou v. AIG Insurance Co. of Canada, 2019 ONSC 627, the Ontario Superior Court of Justice found in favour of a plaintiff who was denied compensation by his insurer after an heirloom ring was allegedly stolen while on vacation.
Justice Gray found that AIG could not rely on “suspicious circumstances” surrounding the alleged theft to show that the plaintiff had not met his burden to show the theft occurred. The insurer had confirmed earlier in the litigation that it was not relying on intentional or dishonest acts exclusions in the policy. As such, the Court held that AIG could not change its position on a summary judgment motion to argue that there was fraud on behalf of the insured.
The plaintiff, James Demetriou, claimed that an heirloom ring (valued at approximately $550,000) attached to a gold chain (valued at approximately $10,000) had been taken from him at knife point during a vacation in the Dominican Republic. Weeks before his trip, the plaintiff had added the ring to an insurance policy he held with AIG.
The plaintiff reported the stolen ring to local law enforcement in Punta Cana, the York Regional Police, the Canadian Consulate, and to his insurer.
AIG investigated the claim, holding a number of interviews with Mr. Demetriou and his family members, but determined early on that it would not be compensating Mr. Demetriou for the alleged theft. AIG ultimately determined that there was insufficient information to substantiate the theft and denied the claim.
The plaintiff then commenced litigation against his insurer.
In its statement of defence, AIG raised the policy’s terms and exclusions, but did not specify whether it was pleading that there was fraud on the part of the plaintiff. The plaintiff requested particulars to determine whether the insurer was taking the position that the plaintiff’s claim was fraudulent.
Following a motion for particulars, the Court ordered that AIG specify whether it was relying on the policy’s intentional or dishonest acts exclusions. The insurer confirmed that it was not specifically relying on these exclusions, but reserved the right to do so should new information arise. AIG stated that it was defending on the basis that Mr. Demetriou had provided insufficient information to substantiate the claim and failed to cooperate with the investigation.
Examinations for discovery were conducted and the plaintiff brought a summary judgment motion. He argued that he had cooperated with the insurer’s investigation and was therefore entitled to compensation.
In response, AIG pointed to “suspicious circumstances” surrounding the theft, including inconsistencies in the interviews with Mr. Demetriou and his family members. AIG argued that the plaintiff had not proven the theft occurred on a balance of probabilities and that pleading fraud was not necessary to assert that position.
The Court ultimately determined that the plaintiff had proven the theft occurred on a balance of probabilities.
More importantly for insurers, Justice Gray held that the “suspicious circumstances” surrounding the theft would only be relevant if AIG were relying on fraud by the plaintiff in its defence. Justice Gray held that, in this case, the insurer had expressly disclaimed any reliance on the intentional or dishonest acts exclusions. AIG could not therefore impliedly advance the argument that the theft had not occurred.
This case will be of interest to insurers who should be aware that denying coverage based on fraud should be done explicitly and, when defending on that basis, it should be made clear at an early stage in the proceedings.
Emma Romano is an associate at Bersenas Jacobsen Chouest Thomson Blackburn LLP, with a focus on media and defamation, aviation, commercial and general civil litigation.